Why NFO mobilisation is at 9-year high

January 13, 2018 11:31 IST

Equity NFOs had a boom period in 2005-2008 where over 170 new equity schemes hit the market.Sector experts appear to have learnt a big lesson from the mistakes of the previous bull run, says Chandan Kishore Kant.Illustration: Uttam Ghosh/Rediff.com

Asset mobilisation through new fund offers (NFOs) in the equity segment has hit a nine-year high.

Industry sources said the new offer from the fund house had raised nearly Rs 3,500 crore.

If this amount is added to the total mobilisation, the overall money raised will easily shoot up beyond a staggering Rs 20,000 crore -- bringing it very close to what the fund houses garnered back in 2008.

Though equity NFOs are coming back strongly, sector experts do not see it as a strong and preferable mode of increasing investors' money.

No doubt, a set of investors are still looking for equity NFOs.

However, when seen in the perspective of total inflows in equity schemes, money coming in through new launches looks quite dwarfed.

For instance, so far, only about 12 per cent of overall flows in equity have come through NFOs.

This suggests that a majority of investors -- new and existing -- prefer established schemes with a performance track record.

The total inflows in equity schemes stand at Rs 1.36 lakh crore.

"Though NFOs have gathered quite a sum this year," says Dhirendra Kumar, CEO of fund-tracking firm Value Research, "I won't go on to say that new launches are making a big comeback. Though NFOs, mainly close-ended, will keep coming from fund houses, dominant inflows will go for existing schemes."